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We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…

Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…

We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…

We study the activity, i.e., the number of transactions per unit time, of financial markets. Using the diffusion entropy technique we show that the autocorrelation of the activity is caused by the presence of peaks whose time distances are…

Much research has been conducted arguing that tipping points at which complex systems experience phase transitions are difficult to identify. To test the existence of tipping points in financial markets, based on the alternating offer…

Previous studies of the stock price response to individual trades focused on single stocks. We empirically investigate the price response of one stock to the trades of other stocks. How large is the impact of one stock on others and vice…

Human decision-making in real-life deviates significantly from the optimal decisions made by fully rational agents, primarily due to computational limitations or psychological biases. While existing studies in behavioral finance have…

In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…

We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…

In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…

In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…

Financial event studies, ubiquitous in finance research, typically use linear factor models with known factors to estimate abnormal returns and identify causal effects of information events. This paper demonstrates that when factor models…

We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…

We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…

We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…

We provide further evidence that markets trend on the medium term (months) and mean-revert on the long term (several years). Our results bolster Black's intuition that prices tend to be off roughly by a factor of 2, and take years to…

In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…

We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…

Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…

This work models the interconnection of company's investment managers' representations and the market attraction of its shares. The models that reflect the connection of the company's market effectiveness indices and parameters of its…